Question

1. the balance in preferred stock after 20% stock dividend is common stock (1150000 shares at .99 per share)

pain in captial in excess of par retained earnings total shareholders equity
2. does it affect stock divident? yes or no? cash dividend is increases or decrease? stockholders equity increase or decrease?

Answer 1

A stock dividend does not affect preferred stock balance, cash dividends are not affected, and stockholders' equity will increase after a stock dividend.

Step-by-step explanation:

When stock dividends are issued, it affects the composition of a shareholder's equity but does not necessarily result in an increase or decrease in total equity. Instead, it transfers a portion of retained earnings to common stock and additional paid-in capital accounts. A stock dividend does not involve the payment of cash to shareholders, unlike a cash dividend, which would decrease the company's cash and retained earnings, thereby reducing total shareholder's equity.

1. After a 20% stock dividend, the balance in preferred stock will not change, as stock dividends distribute additional shares of common stock rather than affecting preferred stock.

2. A stock dividend does not affect cash dividend. Cash dividends are paid out of retained earnings, which are not affected by stock dividends.

3. Stockholders' equity will increase after a stock dividend. The total shareholders' equity will increase because the additional shares of common stock will be added to the capital in excess of par and retained earnings accounts.